Incorrectly Invoiced VAT.

kevcl15

I have recently had a new water connection to an annex/conversion on my property, was duly invoiced for the service, which was paid in full on completion.

I have subsequently had an e-mail from the water board stating that they had incorrectly applied 5% VAT instead of 20%, requesting I pay the additional amount (£167)

So the question is, am I liable for their mistake on the VAT calculation and do I have to pay the additional fee?

Thanks.

user1977

Possibly. What had previously been discussed about the price? I presume it wasn't a complete mystery before you got the invoice? They're allowed to correct an error on the invoice if you had already agreed to the correct price.

(Or to put it another way, if they had overcharged you, you'd be expecting a refund, right?)

DullGreyGuy

What does your quote show?

Grumpy_chap

kevcl15 said:

I have recently had a new water connection to an annex/conversion on my property, was duly invoiced for the service, which was paid in full on completion.

I have subsequently had an e-mail from the water board stating that they had incorrectly applied 5% VAT instead of 20%, requesting I pay the additional amount (£167)

So the question is, am I liable for their mistake on the VAT calculation and do I have to pay the additional fee?

Thanks.

Just to confirm, this is your private property so you are a consumer?
It is not a business property or business agreement.

Were you given a price before the work went ahead?
As a consumer, the price quoted should always be inclusive of VAT.  It can be quoted at £10+VAT (£12 at standard rate) or it can be quoted at £12, but it should be clear what the total price will be.
https://www.gov.uk/tax-on-shopping/where-you-see-vat

user1977

Grumpy_chap said:

kevcl15 said:

I have recently had a new water connection to an annex/conversion on my property, was duly invoiced for the service, which was paid in full on completion.

I have subsequently had an e-mail from the water board stating that they had incorrectly applied 5% VAT instead of 20%, requesting I pay the additional amount (£167)

So the question is, am I liable for their mistake on the VAT calculation and do I have to pay the additional fee?

Thanks.

Were you given a price before the work went ahead?
As a consumer, the price quoted should always be inclusive of VAT.  It can be quoted at £10+VAT (£12 at standard rate) or it can be quoted at £12, but it should be clear what the total price will be.
https://www.gov.uk/tax-on-shopping/where-you-see-vat

The discrepancy suggests a £1,113 + VAT contract. Given it's the "water board" rather than Fred the plumber, I expect there's a contract spelling out what the VAT position should have been, even if they messed up the invoice.

kevcl15

Original amount was £1,117.51. Invoice quoted the VAT at 5% - £55.88, total amount for the service - £1173.39, all paid once the connection was made.

What they are saying is the connection type was wrongly classified and doesn't meet the requirements for VAT at 5%, should have been 20%; from their e-mail....
"Where we have charged at 5%, we should have charged at 20% as the connections were granny annex (which is exempt for a 5% charge). "

Still say this is their error and I have fulfilled my part of the contract by paying the invoice in full as agreed when the contract was entered into.

Alderbank

kevcl15 said:

Still say this is their error and I have fulfilled my part of the contract by paying the invoice in full as agreed when the contract was entered into.

Traders act as (unpaid) tax collectors on behalf of HMRC, just passing on any tax to the treasury. They don't get to choose the amount, the Government does and the rates are published. If you received a service which cost £1,17.51 and the VAT rate for that service is 20% then you owe £235 to HMRC.

HMRC will take the full amount owed from the trader whether or not he has been paid it from you. However if he has evidence that he has tried to get the correct tax from you without success he can claim back that portion of tax he has paid on your behalf but not been able to recover.

HMRC do not like to see money slip from their fingers. They might be too busy to bother about your refusal to pay a mere £180 or so.
Or you might get a buff envelope in the post...

Mistakes do happen. You might want to check whether in fact the correct rate of VAT should have been 5% as originally interpreted by the trader. In that case you would not owe anything further.

Aylesbury_Duck

kevcl15 said:

Original amount was £1,117.51. Invoice quoted the VAT at 5% - £55.88, total amount for the service - £1173.39, all paid once the connection was made.

What they are saying is the connection type was wrongly classified and doesn't meet the requirements for VAT at 5%, should have been 20%; from their e-mail....
"Where we have charged at 5%, we should have charged at 20% as the connections were granny annex (which is exempt for a 5% charge). "

Still say this is their error and I have fulfilled my part of the contract by paying the invoice in full as agreed when the contract was entered into.

Sit tight then.  Only you have the contract information to know whether they are able to sue you to recover the difference.  We can't tell from here.

Jumblebumble

Alderbank said:

kevcl15 said:

Still say this is their error and I have fulfilled my part of the contract by paying the invoice in full as agreed when the contract was entered into.

Traders act as (unpaid) tax collectors on behalf of HMRC, just passing on any tax to the treasury. They don't get to choose the amount, the Government does and the rates are published. If you received a service which cost £1,17.51 and the VAT rate for that service is 20% then you owe £235 to HMRC.

HMRC will take the full amount owed from the trader whether or not he has been paid it from you. However if he has evidence that he has tried to get the correct tax from you without success he can claim back that portion of tax he has paid on your behalf but not been able to recover.

HMRC do not like to see money slip from their fingers. They might be too busy to bother about your refusal to pay a mere £180 or so.
Or you might get a buff envelope in the post...

Mistakes do happen. You might want to check whether in fact the correct rate of VAT should have been 5% as originally interpreted by the trader. In that case you would not owe anything further.

You may be correct 
 I have never heard of HMRC claiming back from an end user 
 I personally don't believe for one second that HMRC are going to start chasing a third party for £180.00
However If I were the OP I would take Grumpys advice  @Grumpy and state that as a consumer they were quoted  £1173.39 for the job, The VAT element of it is of no interest to a consumer and and if the water board make less profit out of the job because they are incapable of quoting correctly that is their look out.

user1977

Jumblebumble said:

Alderbank said:

kevcl15 said:

Still say this is their error and I have fulfilled my part of the contract by paying the invoice in full as agreed when the contract was entered into.

Traders act as (unpaid) tax collectors on behalf of HMRC, just passing on any tax to the treasury. They don't get to choose the amount, the Government does and the rates are published. If you received a service which cost £1,17.51 and the VAT rate for that service is 20% then you owe £235 to HMRC.

HMRC will take the full amount owed from the trader whether or not he has been paid it from you. However if he has evidence that he has tried to get the correct tax from you without success he can claim back that portion of tax he has paid on your behalf but not been able to recover.

HMRC do not like to see money slip from their fingers. They might be too busy to bother about your refusal to pay a mere £180 or so.
Or you might get a buff envelope in the post...

Mistakes do happen. You might want to check whether in fact the correct rate of VAT should have been 5% as originally interpreted by the trader. In that case you would not owe anything further.

as a consumer they were quoted  £1173.39 for the job

I don't think the OP has actually confirmed that's the case, they've just reiterated what the invoice says, not what was discussed prior to that.

Hoenir

kevcl15 said:

So the question is, am I liable for their mistake on the VAT calculation and do I have to pay the additional fee?

Thanks.

Yes you are liable for the undercharged VAT. People make mistakes. Doesn't mean that they cannot be subsequently rectified.